Panama flag detentions put Chinese carriers in US crosshairs

Laura DiBella, commissioner with the Federal Maritime Commission, said China’s port state control inspections against Panama-flagged vessels had continued “with no sign of abatement”. She described the detentions as retaliatory and said they appeared aimed at punishing Panama over its Supreme Court decision to invalidate the concession previously held by Hong Kong-based CK Hutchison for the Balboa and Cristóbal terminals on either side of the Panama Canal. DiBella said Panama-flagged ships carry a meaningful share of US trade and that unwarranted detentions could have commercial and strategic consequences for US shipping. She added that the world could not normalise the practice, warning that it would set a damaging precedent for global supply chains.    The FMC has powers to investigate whether foreign government rules or practices create unfavourable conditions for US foreign trade.DiBella said an investigation into conduct at Chinese ports could lead to remedial measures, including action affecting Chinese-controlled carriers operating in US trades.

The warning follows an earlier FMC statement in March, when DiBella said the agency was closely monitoring China’s actions against Panama-flagged vessels after a sharp rise in detentions.

Earlier industry numbers showed Panama-flagged detentions in Chinese ports rising to 136 ships in April, after a sharp March spike in which Panama-flagged vessels accounted for around three-quarters of all China port detentions.

The figures marked a steep jump from January and February and suggested the pressure on Panama-flagged tonnage had widened beyond isolated port state control cases.

China has denied targeting Panama-flagged ships and has pushed back against US accusations, saying Washington is using the canal dispute to increase pressure on Beijing.

The row stems from Panama’s decision to take control of the Balboa and Cristóbal terminal concessions after its Supreme Court ruled the CK Hutchison-linked concession unconstitutional.

Panama later appointed APM Terminals and MSC’s Terminal Investment Limited as interim operators while a new process is pursued.

Splash reported last month that the Panama Ship Registry has been caught in the middle of the US-China dispute, with owners reassessing flag choice as Chinese scrutiny of Panama-flagged tonnage increased.

No mass reflagging from Panama has yet occurred. However, Chinese leasing companies are now requiring shipowners to reflag away from Panama as a condition of newbuilding finance, with longer-term implications for the registry.   The biggest beneficiaries have been Liberia and the Marshall Islands, which have attracted vessels seeking to avoid becoming entangled in a dispute between the world’s two largest economies.       The latest FMC statement keeps the pressure on Beijing and raises the risk that a port state control dispute could spill into liner regulation and carrier access in the US market.